Sunday, January 22, 2012

Technical Picture - Bullish

The SPX chart above shows that since the new year started, we've broken out of the mean reverting pattern we were in over the past few months. The two fib patterns show two ambush setups. The second smaller ambush reached its 23.6% Fib extension target, and now we are moving towards the larger target - 1344.

The 15 minute SPY chart below, shows three ambush setups. The first two were traditional low to high Fib setups which involved some gap filling. The second Fib ambush blew past the 23.6% target, so now the third fib (red) is an extension from previous high to high. The ambush traded on Friday. If we blow past the 23.6 FE, we'll have to draw new Fibs from Friday's high to the next high, if not, we'll use the same anchor and stretch the Fibs and wait for the next ambush.

In the event that the Fib. extensions fail, we'll have a much deeper pullback, probably all the way, half way back from the base of the blue Fib. pattern on the SPX daily chart.